1998 PLP 1408 (CLC)

3. The High Court Appeal filed against the above order of this Court was dismissed m limine by a Division Bench of this Court comprising Ajmal Mian and Muhammad Mazhar Ali, JJ. (as their Lordships then were) wherein it was held that the respondents (now defendants) after the service of the notice have filed counter‑affidavit averring therein that factually no arbitration proceeding was pending as no dispute was referred to the arbitration by the plaintiffs. It was observed that the proper course for the appellant/plaintiff was to serve a fresh notice under the arbitration clause on the Secretary N ‑ W. F. P. under Registered Post acknowledgement due and in case he fails to proceed with the matter, it will be open to the appellants to approach the Court for appointment of arbitrator. It is further admitted in the Plaint that after the aforesaid order, the plaintiff served a fresh notice on the defendant No.2 and thereafter, filed fresh arbitration proceedings before the defendant No. l who, vide its letter, dated 18‑12‑1989, appointed defendant No.3, namely, Sikandar Ali, Director, Menpower and Training, Government of N.‑W.F.P., Peshawar to act as arbitrator.

4. The grievance of the plaintiffs is that the matter was heard and concluded on 20th May, 1990, at Peshawar whereafter no award was pronounced; that on 8‑4‑1991, without any intimation to the plaintiffs and without hearing them, the Award was announced by the defendant No.3. It is alleged in the plaint that the said arbitrator acted malafidely, illegally and without giving proper opportunity to the plaintiffs. Therefore, instant proceedings were filed with the following prayer; "(i) Set aside the so‑called award, dated 8‑4‑1991 communicated vide letter, dated 6‑5‑1991; (ii) Order to call the respondent No.l/Arbitrator as Court witness and examine his conduct in the matter while action as Arbitrator in Arbitrarily and capriciously manner in order to defeat the claims of the Petitioner; (iii) to appoint fresh Arbitrator in the matter in the interest of justice; (iv) grant cost of the Petition; (v) grant any other relief/reliefs which this Hon'ble Court deems fit and proper under the circumstances of the case. "

5. It is an admitted position that vide clause (13) of the agreement, dated 1st March, 1982, all dispute or difference between the parties was required to be settled through arbitration by the Secretary to the Government of N.‑W.F.P. or by his nominee not below the rank of Deputy Secretary. Defendant No. 1, as it appears from the contents of the plaint, is Director and above the rank of Deputy Secretary. It is also admitted that on 8‑4‑1991, award was pronounced by the defendant No.1 which was communicated to the plaintiffs vide letter, dated 6‑5‑1991. The question which requires determination is, whether this Court has territorial jurisdiction and is competent to give such relief to the plaintiffs in view of sections 31(2) and 32 of the Act of 1940; which read as follows: "31. (1)

(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, tiled, and by no other Court. (3)

(4)

32. Bar to suit contesting arbitration agreement or award. Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any affected otherwise than as provided in this Act."

6. Admittedly, all the defendants in this suit are neither residents nor working for gain within the Province of Sindh. As per addresses given in the title of the plaint, they belong to the Province of N.‑W.F.P. It is also admitted by the plaintiff that vide clause (13) of the agreement, dated 1‑3‑1982, they have agreed to refer this dispute to the sole arbitration of the defendant No. l or to its nominee who both are the authorities working for the Government of N.‑W.F.P. Therefore, which would be the competent Court wherein the Award under the agreement is required to be filed? The answer is very simple, a Civil Court of competent jurisdiction of Peshawar would be the competent Court. Only that Court would be competent to entertain a suit between the parties in which the identical controversy is involved. Subsection (2) of section 31 of the Act, 1940 is to be read with section 2(c) which define "Court" to mean a Civil Court having jurisdiction to decide the question forming the subject‑matter of reference if the same had been the subject‑matter of a suit. (See the Lahore Transport Cooperative Society Ltd. v. Malik Muhammad Sadiq PLD 1958 Lahore 44 and M.A. Jalil v. Group Capt. (Retd.) Salahuddin Khan 1983 CLC 1685). It is only such Court to decide all questions regarding the validity, effect or existence of an award or an arbitration agreement. In the instant case, an earlier application was filed by the plaintiff under section 11 of the Act 1940 (J.M. 8 of 1987) which was dismissed. This will not give jurisdiction to this Court to hear all subsequent applications. I may observe here that mere filing of an application in a Court which has no jurisdiction would not fix that Court permanently as the Court in which all subsequent applications are to be filed. (See Virendra Saigal v. M/s. Sumatilal Jamnalal AIR 1970 Delhi 14). I may also refer to the case of M.A. Jalil v. Group Capt. Salahuddin Khan (1983 CLC 1685) where it was held by a learned Single Judge of Lahore High Court that section 31 of the Act, 1940 provides that all matters relating to a reference should be made before the same Court in which the first application in connection with the arbitration matter was made and that it will be the said Court which alone would be competent to decide all questions in relation to that particular arbitration. It means the Court having competent jurisdiction. In these circumstances, I am of the considered view that this Court has no territorial jurisdiction over the subject‑matter and that the Civil Court Peshawar having territorial jurisdiction is competent to hear and decide this suit.

7. Now, coming to the question of section 32 of the Act, 1940 which prohibits filing of a suit on any ground whatsoever for decision as to existence, effect or validity of an Award, I may refer to an earlier decision of this Court in Afaq Ahmed Ansari v. Zameer Hasan Ansari (PLD 1955 Sindh 282). In that case, a suit was filed for declaration that the partnership between the plaintiff and the defendant stands dissolved and for accounts of partnership assets. Prior to filing of that suit, there was an arbitration proceedings as a result of which an award was given. Defendant filed an application under Order VII, Rule 11, C.P.C. and pleaded that the suit was barred in view of section 32 of the Act, 1940. A learned Single Judge of this Court after reference to the cases Lutufullah Khudabaksh Khan and others v. Muhammad Siddiq Sobho Bhati and others (AIR 1946 Sindh 117) and Muhammad Nawaz Khan and another v. Alam Khan (ILR XVIII Cal. 414), held that it is well‑settled that once the dispute between the parties to any matter has been referred to arbitration, the only remedy open to the party is under the Arbitration Act and not through any suit. It was further held that once an Award has been made, the dispute between the parties relating to the subject‑matter and reference are merged in the Award and no suit can lie which can have the effect of avoiding the Award except under the provisions of the Arbitration Act, 1940. I may point out here that section 32 of the Indian Arbitration Act, 1940 is para materia to section 32 of our Arbitration Act, 1940. In Kanhayalal Vishweshwarlal Mahajan v. Ramchandra Shankarroa Holkar (AIR 1959 M.P. 415), it was held, after relying on the cases Narbadabai v. Natverlal (AIR 1953 Bombay 386) and Nathulal v. Biharilal (AIR 1952 Nagpur 65) that if a suit is filed by a person who is a party to an Award for decision either as to the existence of the Award or its effect, than such a suit is totally prohibited. It was further held that a Court proceeding to hear such a suit will be acting without jurisdiction since as a Court of general jurisdiction its jurisdiction to hear a cause of this nature is curtailed. Similar view was reiterated in the case of Akbar Ali and others v. Mumtaz Hussain and another (AIR 1987 Bombay 39) where after following the cases Satish Kumar v. Surinder Kumar (AIR 1970 SC 833) and Delux Milk Traders v. Satyanarayan (AIR 1979 Bombay 149), it was held that according to the provisions of section 32, a suit on the original cause would be barred because of the existence of the arbitration award and further that a suit on any ground whatsoever for a decision upon the existence, effect and validity of an award stands barred by the provisions of section 32 of the Indian Arbitration Act. I am also conscious of the rule laid down by a learned Single Judge of this Court in Abdul Karim v. Haji Ilyas and 4 others (1986 CLC 1660) where an application under Order VII, Rule 11, C.P.C. filed by the defendant in a suit for dissolution of partnefship and rendition of account was dismissed. It was held that a plaint under Order VII, Rule 11, C.P.C. cannot be rejected on the assumption that section 32 of the Arbitration Act is a legal bar. Rule laid down by this Court in the case of Afaq Ahmed v. Zamir Hasan Ansari (supra), though noted, was dissented. It is a settled law that the provisions of Order VII, Rule 11, . C.P.C. are not exhaustive and an incompetent suit should be buried at an initial stage in order to save the defendants from the hardship and rigours of a protracted trial. If any reference is needed, see Burma Eastern Ltd. v. Burma Employees (PLD 1967 Dacca 190), Pakistan State Oil v. K.E.S.C. (PLD 1991 Karachi 365) and M/s. Standard Hotels (Pvt.) Ltd. v. M/s. Rio Centre and others (1994 CLC 2413).

8. Reverting to the facts of the case, the plaintiff is seeking setting aside of the Award, dated 8‑4‑1991. The dispute was referred to the Arbitrator by the plaintiff who participated in the proceedings. The merits and demerits of the plaintiff's claim were examined by the Arbitrator who on 8‑4‑1991 announced the Award which is subject‑matter of this suit. All this was done at Peshawar, N.‑W.F.P. which are admitted facts. The agreement in question was also executed at Peshawar, N.‑W.F.P. In the circumstances as narrated hereinabove I am of the considered view that sections 31(2) and 32 of the Act, 1940 are fully attracted and the plaint is liable to be rejected. It was contended by Mr. Farooq H. Naek that till this date none of the parties have filed any proceedings under section 14(2) of the Act. 1940 for making the said Award rule of the Court. If it is correct, then it is now more that three years when the Award was passed and, therefore, it would be open to the plaintiff to challenge any such proceedings on the grounds of limitation in view of Article 181 of the Limitation Act. It was held by a Full Bench of Andhra Pradesh High Court in the case of Sait Pamandass Sugnaram v. T.S. Manikyam Pillai and others (AIR 1960 Andhra Pradesh 59) that no party can prejudiced by the mere existence of an Award and that it does not become operative and enforceable until it has been filed in a Court and that such Court adjudicates about its validity. This makes the plaintiff's suit without cause of action.

9. On 4‑3‑1998, the plaint was rejected through a short order. Above are the reasoning for the said short order. A.A./F‑40/K Plaint rejected.